Dec. 2: CMU Study Quantifies Impact of Tiger Woods on Nike and Golf

CMU Study Quantifies Impact of Tiger Woods on Nike and Golf

Nike's Continued Sponsorship Proves To Be Profitable,
But Overall Industry Loses $7.5 Million in Golf Ball Profits

PITTSBURGH—A critical element in successfully engaging a celebrity spokesperson is to understand the real potential to capture and create market share and the risk of negative impact on the brand if the spokesperson does something ridiculous. The saga of golfer Tiger Woods and his relationship with marquee sponsor Nike provided an excellent case study for researchers at Carnegie Mellon University's Tepper School of Business, as they successfully quantified the real-market impacts of his celebrity endorsement from inception to scandal — as they correspond to a single, critical consumer product for the sport — golf balls.

The research was conducted at the Tepper School of Business by Kannan Srinivasan, the Rohet Tolani Distinguished Professor in International Business and H.J. Heinz II Professor of Management, Marketing and Information Systems; Timothy Derdenger, assistant professor of economics and strategy; and doctoral candidate Kevin YC Chung. Golf Datatech LLC, a leading provider of retail marketing information for the golfing industry, extended a rich data set for analysis.

"The industry-wide data that was made available and the unique circumstances involving a high-profile celebrity made this an excellent opportunity for us to study the real-economic impact of celebrity endorsement by focusing on a single product," said Derdenger. "The retail data shows clear movement in sales and brand market share at particular time points that coincide with Woods' endorsement of Nike products and during the period of negative publicity associated with his personal scandal, which began last year."

In golf ball terms, the endorsement of Nike products by Tiger Woods, which began in 2000, resulted in the acquisition of approximately 4.5 million customers and $60 million dollars in profit (in 1997 dollars) for the last 10 years.

In the six months following Mr. Woods' highly publicized personal scandal, Nike lost approximately 105,000 customers. However, these losses were not gained by other brands as the negative publicity resulted in a net loss to the golfing industry, overall, of $7.5 million in profit.

"Although several major sponsors cut ties with Tiger Woods — Nike did not," said Derdenger. "So we examined the net effect on Nike's sales and market share. What we found is that by maintaining their relationship with Tiger Woods, Nike's overall profit in golf ball sales was $1.6 million greater than it would have been without him."

"From the findings of this study, which involve one specific product, we conjecture that similar market impacts have been realized across a full line of golfing equipment, which Tiger Woods was paid $180 million for 10 years (in 1997 dollars) to endorse. Having found that $60 million was recovered in the golf ball sector alone, we project that this would intensify the overall profits and losses across the golfing industry," added Chung.

"Although we have found Woods' continued endorsement to be profitable for Nike, this may not translate into similar results with non-golf related consumer goods — where the celebrity is not inherently part of the enthusiasts community or where his financial success is not directly tied to the use of the endorsed product," said Chung.

The study, "Economic Value of Celebrity Endorsement: Tiger Woods' Impact on Sales of Nike Golf Balls," was completed in November 2010 and is awaiting publishing.